Shares of FedEx CorporationFDX hit a 52-week high of $183.90 on Jun 10, 2015 after the company recently bumped up its quarterly dividend by 25%. However, the company ended the day's trading a trifle lower at $182.32.
The stock has surged in excess of 27% over the past 12 months, and the company's long-term earnings per share growth rate stands at a healthy 32.6%.
On Jun 8, FedEx raised its quarterly dividend to 25 cents (or $1.00 annually) from 20 cents a share (or 80 cents annually). The new dividend, which has been approved by the company's board of directors, will be paid on Jul 2, 2015 to stockholders on record as of Jun 15. The move reflects the company's intention of utilizing free cash to enhance shareholders' returns, thereby boosting their confidence in the stock.
Further, we believe the dividend hike not only highlights FedEx's commitment to create value for shareholders, but also underscores the company's healthy financial condition and confidence in its business, going forward.
FedEx is also undertaking several strategic initiatives to strengthen its business. We are upbeat on FedEx's impending acquisition of TNT Express. The acquisition, expected to close in the first half of calendar year 2016, will significantly expand FedEx's scale of operations, particularly in Europe.
In the event of the deal materializing, FedEx will be able to strengthen its position in the lucrative e-commerce business. Consequently, the deal is in line with the company's ambitions to fortify its footprint in Europe. The deal will also offer substantial cost savings, thereby driving long-term growth for FedEx.
On the other hand, the three-year deal with UEFA to sponsor one of the largest football events - the UEFA Europa League - is another major positive in our view. We see it as yet another strategic step adopted by the company to consolidate its presence in Europe.
FedEx delivered mixed results in the third quarter of fiscal 2015 reporting higher-than expected-earnings but lower-than-expected revenues. Adjusted earnings of $2.01 per share steered ahead of the Zacks Consensus Estimate of $1.88, and were 63% higher than the year-ago quarter.
Notably, the company has delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 3.81%.
FedEx currently holds a Zacks Rank #2 (Buy).
Other Stocks to Consider
Better-ranked stocks worth considering in the transportation sector include Atlas Air Worldwide Holdings, Inc. AAWW , SkyWest Inc. SKYW and Volaris VLRS . All the three stocks carry a Zacks Rank #1 (Strong Buy).
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